Southern Ispat & Energy Ltd. (SOUISPAT) - Director Report

Company director report

Dear Shareholders

Your Directors take immense pleasure in presenting this 20th Annual Report togetherwith the Consolidated Audited Accounts of the Company for the Financial Year 2014-15 forthe period ended on 31st March 2015.

Financial Results (Rs. Million)

Particulars

2014-15

2013-14

Sales & Other Income

6703.13

5065.00

Material Consumed

6362.43

4713.28

Changes in Inventory

(6.61)

0.09

Employee Benefits

4.92

4.66

Finance Cost

5.01

6.65

Depreciation

15.28

9.84

Other Expenses

69.73

46.68

Profit before Taxes

252.37

283.81

Taxes-Current Tax

0.92

0.22

- Deferred Tax

(3.14)

(1.18)

Profit After Taxes

255.52

284.77

Earnings per Share (Basic & Dilutive)

1.93

2.15

DIVIDEND

In order to augment resources for the expansion plans your Directors do not recommenddistributing any dividend for the year ended 31st March 2015.

SHARE CAPITAL

The paid up equity capital as on March 31 2015 was ` 13214.91 Lakhs. During theyear under review the Company had gone for subdivision of the equity shares of theCompany of face value of ` 10/- each into ten equity shares of the face value of `1/- each

REVIEW OF OPERATIONS

During the year under review the Company's financial performance has been adverselyaffected due to the non-availability of raw material increasing raw material costs andvolatile foreign exchange. The company took various initiatives to improve itsprofitability by diversification which helped the Company to post a reasonable performancefor the year.

BUSINESS RISK MANAGEMENT

The Company has devised and implemented a mechanism for risk management and hasdeveloped a Risk Management Policy. The Policy provides for constitution of a RiskCommittee which will work towards creating a Risk Register identifying internal andexternal risks and implementing risk mitigation steps. The Committee will on a quarterlybasis provide status updates to the Board of Directors of the Company.

SUBSIDIARY

In accordance with the general circular issued by the Ministry of Corporate AffairsGovernment of India the Balance Sheet Profit and Loss Account and other documents of theSubsidiary Company is not being attached with the Balance Sheet of the Company. Howeverthe financial information of the subsidiary companies is disclosed in the Annual Report incompliance with the said circular. The Company will make available the Annual Accounts ofthe subsidiary company and the related detailed information to any member of the Companywho may be interested in obtaining the same. The annual accounts of the Subsidiary Companywill also be kept open for inspection at the Registered Office of the Company and that ofthe respective Subsidiary Company. The Consolidated Financial Statements presented by theCompany include the financial results of its subsidiary Company. Details of subsidiary ofthe Company are covered in Management's Discussion and Analysis Report forming part of theAnnual Report

DEPOSITORY SYSTEM

As on 31st March 2015 about 99.95% of the shares of your Company are heldin dematerialized form.

The shares of the Company are available for trading in the dematerialized form underboth the Depository Systems in India-NSDL and CDSL. The International SecuritiesIdentification Number (ISIN) allotted to the Companys shares under the DepositorySystem isINE943B01029. The Annual Custodial Fee for the Financial Year 2014-15 has beenpaid to NSDL and CDSL the Depositories.

During the year out of 1321490800 equity shares being the paid up capital of theCompany as on 31st March 2015 a total of 1320794040 shares constituting99.95% of the paid up share capital stand dematerialized.

LISTING FEES

The Annual Listing Fees for the year 2014-15 had been paid to the Stock Exchanges wherethe Companys shares are listed.

All independent directors have given declarations that they meet the criteria ofindependence as laid down under section 196(6) of the Companies Act 2013 and Clause 49 ofthe Listing Agreement.

Independent Directors

Pursuant to Section 149 of the Companies Act 2013 (new Act) read with the Rules madethereunder the Independent Directors can hold office for a period of up to 5 consecutiveyears and shall not be liable to retire by rotation. They may be appointed for a maximumof two consecutive terms of up to 5 years each. In terms of revised Clause 49 of theListing Agreement which came into effect from 1st October 2014 in case theIndependent Director has already served for 5 or more years he can be appointed for onlyone term of 5 years. However under the new act and Clause 49 of Listing Agreement theymay be appointed afresh with a fixed period of up to 5 years. As per sub-section (5) ofsaid Section 149 the compliance is to be made within one year from the date ofcommencement of the new Act.

Presently Sri. T. N. Sivakumar Sri. Dinesh Kesri and Sri. Madhav Rao are theIndependent Directors of the Company in terms of Section 149. As per their existing termsof appointment all of them are liable to retire by rotation. The Board considered theappointment of the above mentioned Directors in terms of Section 149 and Schedule IV tothe Companies Act 2013 and Clause 49 of the Listing Agreement and was of the view thatthese independent directors fulfill the conditions specified in the Act and the rules madethere under and that the proposed directors are independent of the management and can beappointed for a term of three years during which period they shall not be liable toretire by rotation. These directors possess requisite qualifications appropriate skillsexperience and knowledge in one or more fields of finance law management marketingadministration technical operations and other disciplines related to the Companysbusiness the educational/professional qualifications working experience expertise inline with Companys business positive attributes.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the ListingAgreement the Board has carried out an evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Audit Appointment &Remuneration Committees. The manner in which the evaluation has been carried out has beenexplained in the Corporate Governance Report.

DIRECTOR'S RESPONSIBILITY STATEMENT

Your directors confirm that:

i. In the preparation of the financial statements for the year ended 31st March 2015the applicable accounting standards have been followed along with proper explanationrelating to material departures if any;

ii. The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2015 and of the profitof the Company for the year under review;

iii. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

iv. The Directors had prepared the financial statements for the year ended 31st March2015 on a 'going concern' basis.

REMUNERATION POLICY

The Board has on the recommendation of the Appointment & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report.

MEETINGS

A calendar of meetings is prepared and circulated in advance to the Directors.

During the year six Board Meetings and four Audit Committee Meetings were convened andheld. The details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.

NOMINATION AND REMUNERATION COMMITTEE

The Remuneration Committee of the Board was reconstituted and renamed as Nomination andRemuneration Committee complying with the requirements of the provisions of the CompaniesAct 2013 and the Rues framed there under. The details regarding Nomination andRemuneration Committee Meeting held during the Financial Year is annexed to the CorporateGovernance Report.

SOCIAL RESPONSIBILITY AND COMMUNITY DEVELOPMENT

Corporate Social Responsibility occupies a central position in Companies activities andis an ongoing daily affair. Our Company's plant at Kottayi Palakkad is a leadingindustrial unit in the region and therefore the local community looks towards the Companyfor social support. Company continues to provide necessary support to economicallybackward people of the adjoining villages through various community development educationand healthcare programmes.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges a separate sectiontitled "Management Discussion & Analysis" has been included in this AnnualReport along with a Certificate of compliance from the Auditors and forms an integral partof this report.

STATUTORY DISCLOSURES

i) A declaration signed by Chairman & Managing Director as required under Clause 49(I)(D) of the Listing Agreement is enclosed.

ii) The Chairman & Managing Director have given a certificate to the Board ofDirectors as required under Clause 49 (V) of the Listing Agreement for the year ended 31stMarch 2015.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard-21- Consolidated Financial Statements preparedon the basis of audited financial statements received from subsidiary company as approvedby their respective board forms part of this Report and Accounts.

AUDIT COMMITTEE

The Audit Committee of Board of Directors constituted in terms of Clause 49 of theListing Agreement and Section 177 of the Companies Act 2013 consists of Sri. T.N.Sivakumar as its Chairman and Sri. Manish Kumar Mishra and Sri. Madhav Rao as its members.

AUDITORS AND AUDITORS REPORT

The Auditors Report and Notes to the Accounts are referred in the AuditorsReport are self explanatory and therefore do not call for any further comments orexplanation.

M/s Sunil Johri & Associates Chartered Accountants Raipur Auditors of theCompany hold the office till the conclusion of 22nd Annual General Meeting andare eligible for reappointment. A Certificate from the auditors has been received to theeffect that their reappointment if made would be within the prescribed limits underSection 139(1) of the Companies Act 2013.

FIXED DEPOSITS

Your Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014.

DEPOSITS

The Company has not accepted any fixed deposits during the period under review.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

The Company has not given any loans or guarantees covered under the provisions ofSection 186 of the Companies Act 2013.

The details of the investments made by Company is given in the notes to the FinancialStatements

The information relating to Conservation Of Energy Foreign Exchange Earning And OutGo Technology Absorption pursuant to Section 134(3)(m) of the Act read with Rule 8 SubRule 3 of the Companies (Accounts) Rules 2014 are annexed to this report.

PARTICULARS OF EMPLOYEES

None of the employees of the Company was in receipt of remuneration above ` 200000/-per month or ` 2400000/- per annum during the year under review and as such thereis no need to give a declaration u/s 217 (2A) of the Companies Act 1956.

CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to themembers of the Board and all employees in the course of day to day business operations ofthe

Company. The Company believes in "Zero Tolerance" against bribery corruptionand unethical dealings/ behaviours of any form and the Board has laid down the directivesto counter such acts. The code laid down by the Board is known as "Code of BusinessConduct" which forms an appendix to the Code.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has a vigil mechanism named Fraud and Risk Management Policy to deal withinstance of fraud and mismanagement if any.

In staying true to our values of Strength Performance and Passion and in line with ourvision of being one of the most respected Companies in India the Company is committed tothe high standards of Corporate Governance and stakeholder responsibility.

The Company has a Fraud Risk and Management Policy to deal with instances of fraud andmismanagement if any The FRM Policy ensures that strict confidentiality is maintainedwhilst dealing with concerns and also that no discrimination will be meted out to anyperson for a genuinely raised concern.

A high level Committee has been constituted which looks into the complaints raised. TheCompany reports to the Audit Committee and the Board.

The Company has in place an adequate and appropriate system of internal controlcommensurate with its size and nature of business to ensure efficacy of operations andcompliance with applicable legislations. The Company has comprehensive budgetary controlsystem. The management regularly reviews actual performance.

INDUSTRIAL RELATIONS

During the year under review your Company enjoyed cordial relationship with workersand employees at all levels.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company all the time strives towards the development of its employees to upgradetheir skills and to boost the motivation levels of its human resource through variousmechanisms. For enhancing the team spirit of the employees departmental quality circlesand other awareness programmes being organized from time to time. We were successful inmaintaining a healthy working environment and cordial industrial relations throughout theyear. The efforts put in by the employees at all levels are highly commendable and havecontributed immensely to the excellent performance of the company. Your Company HR teamhas been continuously striving for establishing a better and congenial relationship withWorkmen Unions and all external agencies resulting in achieving zero man days' loss dueto industrial unrest.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarms length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with Promoters KeyManagerial Personnel or other designated persons which may have potential conflict withinterest of the Company at large.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a viewto regulate trading in securities by the Directors and designated employees of theCompany. The Code requires pre-clearance for dealing in the Companys shares andprohibits the purchase or sale of Company shares by the Directors and the designatedemployees which in possession of unpublished price sensitive information in relation tothe Company and during the period when the Trading Window is closed. The Board isresponsible for implementation of the Code.

All Board Directors and the designated employees have confirmed compliance with theCode.

SECRETARIAL AUDIT

Pursuant to provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Palak Desai Practising Company Secretary to undertake the Secretarial Audit ofthe Company. The Secretarial Audit Report is annexed herewith as "Annexure A"

COST AUDITORS

M/s Arindam & Associates Cost & Management Accountants Raipur Cost Auditorsof the Company has been re-appointed as the Company's Cost Auditors for the Financial Year2015-16.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as "Annexure B".

ACKNOWLEDGEMENTS

The Directors would like to express their sincere appreciation and co-operationreceived from the Central Government Government of Kerala and Kerala Industrial AreaDevelopment Board. The Directors also wish to place on record its appreciation for thecommitment displayed by all employees at all levels resulting in the successfulperformance of the Company during the year.

The Directors also take this opportunity to express its deep gratitude for thecontinued cooperation and support received from its valued shareholders.

The Directors express their special thanks to Mr. Vivek Agrawal Chairman &Managing Director of the Company for his untiring efforts for the progress of theCompany.

The Company is using Induction Furnace and hence possibility of conserving energy is limited.

b. Additional investments and proposals if any being implemented for reduction of consumption of energy

NIL

Impact of measures at (a) & (b) above for reduction of energy consumption and consequent impact on the cost of production of goods.

NA

FORM A

A. Power and Fuel Consumption

Current Year ended on 31/03/15

Previous Year ended on 31/03/2014

1 Electricity

Purchased

Units/KWH

8221360

5597280

Total Amount (Rs. in Lakhs)

493.60

308.81

Rate/Unit (Rs.)

6.00

5.52

Own Generation (Diesel Generation)

Units/KWH

NIL

NIL

Units per litre of Diesel Oil

NA

NA

Cost of Unit of Diesel Oil (Rs./KWH)

NA

NA

2 Coal

Qty (MT) (Grade varies from A to D)

NIL

NIL

Total Cost (Rs. lakhs)

NA

NA

Average Rate (Rs./Tonne)

NA

NA

3 Furnace Oil (Diesel Oil/LD Oil)

Quantity (Litres)

NIL

NIL

Total amount (Rs. lakhs)

NIL

NIL

Average rate (Rs./Litre)

NA

NA

B. Consumption per unit of production

Product

Current Year (31/03/15)

Previous Year (31/03/2014)

M S Ingots

Electricity (KWH)

Diesal / LD Oil (Ltr)

Coal (MT)

Electricity (KWH)

Diesal / LD Oil (Ltr)

Coal (MT)

1555

Nil

Nil

1409

Nil

Nil

II. Technology Absorption

FORM B

(Form for disclosure of particulars with respect to Technology Absorption)

1. RESEARCH AND DEVELOPMENT

The Companys products are well within the stipulated requirements of theCustomers and

Research & Development works are going on a routine manner. The Company has notincurred any expenditure on this account as the same is a routine. The company has fullyfledged laboratories at its Plants for testing the quality of Raw Materials and also ofthe finished products.

2. TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

Since no technology has been absorbed from outside the item is not applicable to us.The Company however continues the efforts for up gradation of technology in order toimprove the quality and reduce cost to the extent possible.

SECRETARIAL AUDIT REPORT

For The Financial Year Ended On 31st March 2015

(Pursuant to Section 204(1) of the Companies Act 2013 and Rule No.9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014)

To

The Members

Southern Ispat & Energy Limited

I have conducted the secretarial audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Southern Ispat & EnergyLimited (hereinafter called the Company). Secretarial Audit was conducted in a manner thatprovided me a reasonable basis for evaluating the corporate conducts/statutory compliancesand expressing my opinion thereon.

Based on my verification of the Companys books papers minutes books forms andreturns filed and other records maintained by the Company and also information provided bythe Company its officers agents and authorized representatives during the conduct ofsecretarial audit I hereby report that in my opinion the Company has during the auditperiod covering the financial year ended on 31st March 2015 complied with thestatutory provisions listed hereunder and also that the Company has proper Board-processesand compliance-mechanism in place to the extent in the manner and subject to thereporting made hereinafter:

I have examined the books papers minute books forms and returns filed and otherrecords maintained by Southern Ispat & Energy Limited for the Financial Year ended on31st March 2015 according to the provision of:

(i) The Companies Act 2013 (the Act) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act 1956 (SCRA) and the rules madethere under; (iii) The Depositories Act 1996 and the Regulations and Bye-laws framedthere under; (iv) Foreign Exchange Management Act 1999 and the rules and regulations madethere under to the extent of Foreign Direct Investment Overseas Direct Investment andExternal Commercial Borrowings; (v) The Regulations and Guidelines prescribed under theSecurities and Exchange Board of

(e) The Employees Provident Fund and Miscellaneous Provisions Act 1952 andrules made thereunder (f) The Payment of Bonus Act 1965 and rules made thereunder (g)Payment of Gratuity Act 1972 and rules made thereunder (h) The Water (Prevention &Control of Pollution) Act 1974 Read with Water (Prevention & Control of Pollution)Rules 1975 (i) Food Safety and Standards Act 2006 and rules made thereunder.

We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by the Institute of Company Secretaries of India. (ii)The Listing Agreements entered into by the Company with Bombay Stock Exchange.

During the period under review the Company has complied with the provisions of the ActRules Regulations Guidelines Standards etc.

We further report that

The Board of Directors of the Company is duly constituted with proper balance ofExecutive Directors Non-Executive Directors and Independent Directors. The changes in thecomposition of the Board of Directors that took place during the period under review werecarried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings agenda anddetailed notes on agenda were sent at least seven days in advance.

Majority decision is carried through while the dissenting members views arecaptured and recorded as part of the minutes.

We further report that there are adequate systems and processes in the Companycommensurate with the size and operations of the Company to monitor and ensure compliancewith applicable laws rules regulations and guidelines.

Sd/-

Palak Desai

Place: Mumbai

Practising Company Secretary

Date: 14th August 2015

CP No. 7426

Note: This report is to be read with our letter of even date which is annexed asANNEXURE A and forms an integral part of this report.